Nationwide Insurance Is Getting Sued…Again

Last week, Nationwide Insurance Company was sued in Virginia by a current agent disputing a controversial new decision against its exclusive agent distribution channel. For Nationwide this is not rare. In fact, quite the contrary. Unlike their industry competitors, over the past decade, Nationwide Insurance Company has been sued several times by current and former exclusive agents which begs the question, “Why?”

When evaluating their business model Nationwide has elected to have two different distribution channels simultaneously; independent and exclusive agents. At present Nationwide claims to have two thousand exclusive channel agents and ten thousand independent channel agents in the country. The sole difference between the two distribution channels is that while independent agents offer Nationwide products alongside many competitors, exclusive agents (often called “career agents”) are obligated to offer only Nationwide products and in return for this concession the exclusive agent channel is promised retirement benefits from the company.

The subject of this most recent lawsuit are those very benefits and the lawsuit is being waged by a 57-year-old agent named Patrick Potter. He has been working as a Nationwide exclusive agent since 1994 after serving as a Captain in the Virginia Army National Guard before subsequently taking over his father’s agency, also a decorated war veteran, who himself had sold Nationwide products to clients for 60 years. In April of 2018 Nationwide Insurance announced that it would terminate the entire exclusive agent channel as of July 1, 2020, in favor of only having independent agents moving forward. Additionally, they announced that any exclusive agents who wish to transition to independent agents will be forced to pay large sums of money to purchase their “book of business”, the clients that they have acquired and dutifully served for years, from Nationwide who believes they own those client relationships. Nationwide’s decision came without warning or consultation with their agent force and will impact the entire exclusive sales force, all of whom are just small business owners like Mr.Potter, and they have claimed that they are contractually entitled to do it. Patrick Potter has asked a court to decide.

Sadly this is not new for Nationwide Insurance. With one class-action suit currently against them alleging fraudulent recruiting tactics and with past cases (which can be found here and here)over similar disputes from the past one must wonder why Nationwide Insurance can’t avoid regularly facing-off against its agents, and ultimately if consumers will decide to stop supporting this questionable corporate behavior? Nationwide would claim their hand is being forced to keep up with an ever-changing industry. Others argue that this latest move is merely a crafted charade to eliminate two thousand potential future plaintiffs while simultaneously carrying out a corporate cash-grab of billions of dollars of benefits promised many years ago and forcing agents to spend billions of dollars more when they are vulnerable. Nationwide claims they have only been developing this program since 2017 and as is often the case there is a substantial price to be paid when large corporations make impulsive decisions. For now, we wait to see another example of David v Goliath play out in the US District Court for Western Virginia while thousands of small business owners, and their families and their staffs’ families, wait to learn their fate.

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